Thursday, April 07, 2011

The Wholesale Liquor Cartel Harms Consumers

NY Times -- "Imagine if Texas lawmakers, in a bid to protect mom-and-pop bookstores, barred Amazon.com from shipping into the state. Or if Massachusetts legislators, worried about Boston’s shoe boutiques, prohibited residents from ordering from Zappos.com. Such moves would infuriate consumers. They might also breach the Constitution’s commerce clause, which limits states from erecting trade barriers against one another. But wine consumers, producers and retailers face such restrictions daily.

The wholesaling industry’s survival depends on maintaining today’s highly regulated system. It is estimated that because of wholesalers, consumers pay 18 percent to 25 percent more at retail than they otherwise would.

Last month, Representative Jason Chaffetz, Republican of Utah, introduced a bill in the House that would allow states to cement such protectionist laws. It should appall wine snobs, beer swillers and even teetotalers. In this case, the law would protect not small stores and liquor producers, but the wholesale liquor lobby."

7 Comments:

At point I worked for a guy who owned acreage in Napa Valley. He could not set up a website and sell directly to consumers in Florida, or many other states.

This goes to show again: Most restrictive regulations on business actually prevail at the local and state levels.

You cannot set up a push-cart hot dog stand, drive a jitney. Practice law. Start a winery, sell direct to consumers through the Internet. Build a skyrise condo in Newport Beach, CA. Zoning laws, controlling what you do on your property, are always local. You cannot sell pot, cigarettes, alcohol w/o license.

Fans of state and local control may talk about free enterprise, but what they are really talking about is the local establishment controlling business.

High-minded talk about free enterprise? Usually just rouge on a whore.

I'm not sure how they do it, but here in Houston, we have a local wine+spirits retailer called Spec's. They deal with all the same wholesalers, but their prices are unbelievably low (lower than national Sam's Club on the same brands) and the selection is mind boggling.

My best friend works for a giant, nation-wide wholesale outfit in Missouri and he marvels every time he comes down here.

So, there's clearly a way to deal with this (at least in Texas - Missouri, for example is a "no deal state". Meaning it's illegal to sell 1,000 cases to Wal-Mart for a cheaper, volume price than 1 case to Bob's liquor), but Spec's is the only one I know of to figure it out.

It appears that the bill seeks to maintain the status quo: "Congress to recognize and reaffirm that alcohol is different from other consumer products and that it should continue to be regulated by the States" to the advantage of both the wholesalers and the states who collect taxes on liquor sales.

I agree, these restrictions should be eliminated with provision that states be allowed some reasonable means of ascertaining that the purchaser is of legal age. Of course, what is not remarkable is the hypocrisy of the NYT in feigning outrage at Americans being given "fewer choices" that "makes them pay more". This is, after all, the newspaper that has championed the state/union monopoly on education and other services that could be provided by the competitive private sector with greater quality and at lower prices. The second to last paragraph offers an insight into their sudden free-market conversion with regard to wine sales: "Wine clubs affiliated with newspapers (including this one) ... are taking off." It seems that self-interest is at the heart of the NYT's advocacy as well.

In Utah, the only liquor stores are state liquor stores, so the state government has a monopoly on the sale of wine and spirits. There are no private wholesalers or retailers of these products within Utah. Thus, the Utah congressman's bill is designed to protect the state liquor stores from out-of-state competition.